Q4 2022 First Bancshares Inc (Mississippi) Earnings Call

Speaker 2: You you F.

Speaker 3: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1-1.

Speaker 4: Good day, and thank you for standing by, and welcome to the review of fourth quarter 2022 Financial Results Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone.

Speaker 5: Well, good morning, everybody. I'm Hoppe Cole, President and CEO of First Bank shares, and we've got several of our team members with us today. We have Dede Lowery, our CFO . We have J.J. Fletcher, our Chief Lending Officer, George Noonan, our Chief Credit Officer, and Leonard Borland, who I'm proud to say is the former CEO of Heritage Southeast Bank and is currently the Regional President for Georgia in our company. And as always, we've got some prepared comments, and we'll talk about some high-level events that went on during the quarter. Then I'll give it over to the individual areas, and they'll talk about asking for additional color in each of their respective areas of expertise.

Speaker 6: To start, we had a good quarter, but an exceptional year. We're really excited given all that we accomplished in 2022 about how we're positioned and some of the tailwinds that we're going to enjoy from some of the acquisitions that we did and some of the organic growth that we had in 2022. So for the quarter, we closed in the Heritage Southeast transaction effective.

Speaker 7: the system conversion of Beach Bank. Early December we converted and the transaction went very smooth with minimal client impact.

Speaker 8: So if you look together, those two acquisitions added approximately $2.3 billion in assets to the company. And so today, we're about $8.1 billion in total assets.

Speaker 9: In addition to providing increased scale, it really is an inflection point for the growth opportunities for our company in that these two acquisitions give us a meaningful presence in new markets in Atlanta, Georgia, Savannah, Jacksonville, Tampa, and really increased our market share in the Florida panhandle. It's not just scale. It's not just opportunities they gave us.

Speaker 10: $55 million in net loans or 6% on an annualized basis. For the year, $316 million of net loan growth or 11%. So a really good year, really good sort of tailwinds pushing us in terms of unfunded commitments as well. I'll dig into that a little more.

Speaker 11: and we feel really good about where we're going in terms of growth for 2023. We're also pleased during the quarter with how where the margin came out on the core margin was only down three basis points. If you guys will remember, we guided the margin compression in the fourth quarter because of the seasonality of our deposits and if you look back over history because some you know we've got pretty good

Speaker 12: public buying deposit portfolio. They tend to cycle through the year. The fourth quarter is our seasonal low point. So we're really pleased we were able to manage the margin only keep it relatively flat or essentially keep it relatively flat quarter over quarter. DD will offer a lot more color in terms of margin management where we came out.

Speaker 13: for the quarter. We also took an interesting strategy. At the end of the third quarter, we made a really strong move in terms of our posted deposit rates, and on a percentage basis normally than we would we would usually do. So we moved from the lower end of tier of our competitive set across our markets for interest-bearing deposits.

Speaker 14: We moved to the midpoint and then we backed off of it. So we made a fairly large move at the end of the quarter so that when people open their statements at the beginning of the fourth quarter, they would see we made a fairly large move and it would slow some of the runoff that we were experiencing. So I think we were pleased essentially to have to pot us down 1%.

Speaker 15: quarter over quarter. We haven't moved our posted rate since then. We've just been matching around the margin toward when we had to. And then finally, credit metrics continue to improve. George will dig into that a little bit, but past dues, non-performers, improve during the quarter and during the year. So, again, a good quarter. We're pleased with the quarter, but an exceptional year.

Speaker 16: We think we enjoy some tailwinds, some real tailwinds in terms of growth and earnings going into 2023.

Speaker 17: So with that, I'll hand it off to DeeDee to dig into financials a little bit more. Okay, great. Thanks, Hoppy. And obviously, as Hoppy mentioned on our two acquisitions, we do have a little noise again in this quarter really related to acquisition charges on both the BEACH transaction and then the Heritage. So and these are the questions that I'll.

Speaker 18: HSPI transaction that closed January 1st. But a couple of things I wanted to kind of reiterate that we discussed last quarter was that we did expect margin compression. And really, that was coming from as we have in the past prior to COVID. Due to the seasonality of our deposit portfolio, we would be in a borrowed position.

Speaker 19: And then also we talked about that we would have increased deposit costs due to our rate increases on our deposit portfolio. Javi mentioned a few minutes ago about how we did make a big, you know, a significant move at the end of September to bring us from kind of well below our peers to kind of right in go.

Speaker 20: by case basis and continuing to do that as some of the other competition is offering some higher rate specials and, you know, we're just managing them case by case. But for the fourth quarter, we did report earnings of $16.3 million or $0.67.

Speaker 21: On operating basis, earnings were $17.2 million or $0.71. This did compare to $19.6 million last quarter, $0.85.

Speaker 22: which was a decrease of about $2.4 million. But if you recall, during the third quarter, we talked about the non-accrual interest income recapture we had in the third quarter of $1.5 million. That was 10 basis points to the margin and also a million and a half.

Speaker 23: for this decrease. And then during the fourth quarter, we always have kind of year-end additional expenses related to year-end accruals. Salary benefits was about $700,000. So those are a couple big items that we, you know, should compare between third and fourth quarter.

Speaker 24: We're very pleased that we remain flat for the quarter on our margin. I mean, on our income here, we feel like with those two items that we basically maintained where we were and really less contraction than we initially thought we might have on the margin.

Speaker 25: But, you know, we have a great low cost diversified deposit base and I think that that showed this quarter for us. And so we're very pleased with our with our quarter on a yearly basis. We had a great year and we reported 62.9 million.

Speaker 26: On operating basis, that was $68.3 million, and that compared to $64.4 million for 21. That was a 6% increase, or $3.9 million. And also, just of note, 2021 did include...

Speaker 27: $11.5 million in PPP fee income that was only $1.7 million in 2022. So we feel like basically overcoming that $9.5 million of PPP fee income and then increasing that $4 million year over year was a great year for us. We were

Speaker 28: We had just hoped kind of at the beginning to cover the PPP fees, and we did that and more. So we're very happy with that.

Speaker 29: As we mentioned, our margin did contract on a core basis, three basis points, because if you remember, we reported 350 last quarter. The 10 basis points of that was related to that recapture. So really the 340 we mentioned we would have contraction, and we did three basis points to 337. Ok, thank you.

Speaker 30: Loan yields did increase 31 basis points when you adjust out for that recapture for last quarter, for the third quarter. So we were very pleased with loan yields increasing 31 basis points. And our deposit cost of deposits increased 31 basis points as well for the fourth quarter.

Speaker 31: it's basically the same increase. We were at basically 19 cents cost of deposits for the fourth quarter of last year and then to increase 32 basis points for this quarter. So I think given that FEDS funds increased more than 25 basis points over that course of 22.

Speaker 32: 450 and we're still reiterating that today. We do have heritage obviously coming on 11 that will add to our margin. So we feel like that's still acceptable for 2023. A couple of notes on our ratios.

Our operating ratios for the fourth quarter, our ROA was a 107 and our return on our average tangible common equity was a 1683 and our efficiency ratio operating was 59.34. So we feel kind of given everything that happened in the fourth quarter with the increasing cost of deposits.

Those were great metrics for the quarter. Our capital ratios, our TCE, 6.9, and our leverage ratio is 9.4, and our total risk-based capital was 16.7. So, Phil, all of our capital ratios are still very good, and we're very pleased with the quarter.

Well, that's all my prepared marks, Hoppy, if you need to take it back over. Thank you, DD.

JJ, now would you give us some color on the loan portfolio for the quarter?

Yes, thank you Hoppy. As Hoppy said, we were pleased with organic long growth of about $55 million in the quarter, particularly given the headwinds and rising rate environments and Fed moves, a lot of uncertainty during the quarter. We were very proactive in moving up uncommitted rates and then reviewing all renewals and modifications very timely in picking up yields.

positive there. Four Quarter was also the first full quarter of integration with the Beach Legacy portfolio. Happy to report that they had a very positive contribution to the overall bank out of that 55 million approximately 20 million that growth was attributable to the Beach Bank portfolio or legacy portfolio.

We also finished the year on a high note with about 106 million in originations in December , so a strong close to the year, which helped our year-end numbers. We continue to track our loan payoffs and paydowns. About 10% loss to competition remained constant. We focus on that to make sure that we are not losing business to our competitors.

Also with the integration of BEACH, our trailing unfunded commitments that we track pretty closely, that range from 350 to 370. We had a nice bump there to about $424 million at the end of the year with the lines and availability from the BEACH Bank portfolio. Pipelines, as we expected, did compress about 20% at year end.

However, we're comparing that to really record year throughout 2022. So about 422 million in total combined portfolio or pipeline at the end of the year. So we're pleased with that number. And then also note that we had some areas of a positive gain private bank for one which continued stellar year in 2022.

quarter and we have those locations strategically along the Alabama, Mississippi, Florida, Gulf Coast area and then in Tampa. So we're looking forward to expanding that throughout the year in 2023. So, Hoppy, I'll turn it back over to you.

Thanks, JJ. Appreciate the update. George, could you have some color on our credit metrics and performance for the quarter? Will do, Hoppe. Thank you. Just to give you some basically kind of an annual look to keep credit metrics highlights, Hoppe referred to delinquencies. Our 30-day pass-through loans.

there. Our total past use plus loans on non-accrual at year end were acceptable about 49 basis points compared to total

So we think that's a pretty good place to be at year end. Non-performing assets as a percentage of loans plus OREO, we're actually able to get those cut in half during the year. We started quarter one with about 100 basis points.

in that metric and we finished the year right at 47 basis points. So some good performance and results there. A lot of that came as a result of one transitional change in a large

But we had a lot of other Oreo progress too, which we'll cover in a minute.

Our loans on non-accrual were reduced by a little over 50%.

So that had a very positive impact.

While we do show an actual increase in Oreo for a net increase of about 1.99 million for the year, we keep in mind that that also includes taking on in August approximately 8.1 million in Beech Bank Oreo.

in the end of the third quarter. So that did have an impact on our year-end Oreo, but we were able to reduce of that 8.1, we got a sale of $6 million in Oreo out of the beach bucket in the fourth quarter. So that got us back to a.

to $1.99 million for the year in terms of increase. And we managed through the sale of Oreo throughout the year.

to end up with about a 214...

100,000 net gain on sale, so good marketing efforts and interest in our Oreo, and it's always good to have a net gain on sale as you're liquidating exposed properties. Charge-offs for the year were manageable. We had 660,000 in charge-offs, but that was all set by...

And as far as our risk rating of our loan portfolio, criticized and classified loans showed some good.

of our loan portfolio criticized and classified loans showed some good improvement.

We had a net reduction of criticized and classifieds for the year of a little over $30 million. And that, of course, included taking on the Beach Bank C&C loans. And we're working with those to try to achieve some upgrades.

into the first and second quarter of the year. At the end of the year, our special mention loans were a little over $43 million and $58.5 million for sub-standards.

And just on a comparative basis C&C loans at quarter one were 24% of capital plus ACL end of the year 15%.

And just on a comparative basis, C&C loans at quarter one were 24% of capital plus ACL at the end of the year at 15%. So positive trend there.

And we believe we're adequately reserved with an ACL in the 103 basis point range. We took $6.9 million in provisions during the year. That included our fourth quarter $705,000 provision as well as the provision for in Marqu considering the

the end of the third quarter for the beach bank PCD mark of about 1.3 million.

So those were our key metrics for the year, and generally stable and to improve in most cases.

Obviously, with the macroeconomic trends out there and the direction we're all expecting, we are maintaining a lot of focus as well as being adaptive while still adhering to our longstanding corporate credit culture.

We remain focused on stressing interest rates on our maturing loans. We have a little over $305 to $10 million or so in loans maturing in 2023. The average weighted rate for that...

segment of the portfolio is a little under 5%. So we can expect to see 250 basis point to 300 basis point elevation and rates on that segment of the portfolio.

We are looking closely at gross and operating margins of our borrowers for increased elevated expenses. They are impacting those margins.

and obviously their continued capacity for acceptable coverages on the leverage side.

in our monitoring for tenant lease quality, strength, terms, and conditions. That is one area in a lot of our sub-segments in CRE such as multi-family, hospitality, and other segments.

rights and languages need to be parallels,orked into andassadorized the

can be adjusted outside of a fixed lease so we are paying close attention in particular to the retail side. And in closing I'd say I believe we're positioned well for any changes ahead

rising rates and our followers and look forward to 2023 continued performance.

Thank you George, appreciate the comments, additional color on the credit book. So that concludes our prepared comments and I think, wait a minute, I almost, Denny had to remind me Leonard, I'm sorry Leonard. Leonard Morland, the former CEO of Heritage.

And our current Regional President will update us on heritage performance for the quarter. Sorry about that, Leonard. That's all right, Bobby. Thank you, everyone. Glad to have this opportunity. First, I'd like to just say it was our goal at HSBI to not only deliver a quality organization into the industry, but also to the industry as a whole.

the first organization, but also do so with a lot of momentum for the 2023 year. For the quarter for HSBI and HSB, of course we had very many moving parts, especially in the last month of the year, culminating in our year-end closing of the transaction. Highlights for the quarter.

balance sheet with that of the first and the retirement of the HSBI debt. Deposits declined during the quarter 103 million to 1.4 billion. Approximately 40 million of this decrease is associated with normal cyclical activities by our business clients. We

The remaining roughly $60 million was related to clients seeking higher rates of returns than the bank was offering on interest-bearing deposits. The liquidity position of HSBI allowed the retention of core low-cost deposits while allowing higher-cost single-service clients to move outside of the bank.

Loans grew during the quarter 49 million and concluded the year at 1.2 billion, a 136 million or 12.9% increase for 2022. Long growth was robust across all sectors.

with non-farm, non-residential, and commercial and industrial leading the way with double digit growth. Asset quality remains strong with total delinquencies including non-accruals of 0.33% of total loans, total non-performing assets.

end of the year at 0.22% of total assets, and net charge-offs for the year were two basis points of total loans.

Earnings for the quarter were impacted by the merger. Net income before tax.

for the quarter was a loss of $8.8 million. Core earnings would have been approximately $8.2 million pre-tax and $6.2 million after-tax, or $0.85 per share. This compares to $6 million, or $0.83 per share for the third quarter of 2022, excluding transaction-related costs.

and we're off to a great start.

With that, I'll conclude my comments. Thank you Leonard. Great quarter. Appreciate it. As you can see, we're really excited about how we're positioned going forward for the upcoming year and beyond. We've had some real significant tailwinds, particularly in terms of new opportunities for growth and some real tailwinds in terms of EPS growth, we believe.

That concludes our prepared comments and we'll open it up for questions. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.

To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.

And one moment for our first question.

And our first question comes from Matt Olney from Stevens. Your line is now open.

Thanks, good morning everybody. Hey Matt, how are you? I'm great, I'm great. Thanks for all the prepared remarks. Just a few questions here. Want to clarify on the deposit commentary. I think what you said was you made the big move in posted rates in September . Innatural Play Takila

So fourth quarter would have received the full impact of this and you've not made any meaningful changes to those posted rates.

So I guess one, is that right? And then two, as you look at your current posted rates versus your competition and what they're doing, how do you feel about the need to make another catch up in posted rates over the next few weeks and months?

You're exactly right on the timing. Right the last week of the month we made a material move to get to the midpoint of our competitive set. And so we got the full impact of that in the quarter, but we just haven't seen any that really stymied or slowed down the runoff we saw in some of those interest bearing accounts and we haven't felt the need to move those.

And not only interest-bearing transaction accounts, but city rates as well. So we haven't had to move those to maintain our deposit base. And given where we think the cash flow coming back to us, the growth in public money, the combination with HSBI, the liquidity that's going to provide us because we're in the process of liquidating their bond portfolio.

and we'll take that to pay down the borrower. We were net barred for the quarter, last quarter, which normal seasonality, our public money would come back, we'd pay that off anyway, but we're kind of getting a $200 million head start with liquidating the bond portfolio at HSPI.

So we don't think we don't feel like we're going to have the same percentage increase at least over the next quarter or two that we had in this last quarter.

Okay, that's helpful. Poppy, thanks for that. And I think Dede mentioned that there were some higher borrowings in the fourth quarter from the seasonal aspect. Have those also been paid down since the quarter?

We're working on that right now, Matt, as Hapi mentioned. The public funds tend to come in a little bit more later in January and February , but we're in the process of selling the bond portfolio from Heritage, and so we have reduced that one. We've reduced that area and we have reduced that so far, but we're not completely gone yet.

the transaction. Is that right? And just remind me of expectations of securities cash flows in...

you know, over the course of the year. So we've done about a third of it so far because it's a whole bunch of smaller securities. And so we've done about a third of it so far, but we should have it complete in a couple of weeks. Yes. And that's why we feel pretty confident about paying out of that bar position as well as public monies coming in.

Okay.

And then as far as the margin that you talked about, the 350 to 360, just clarify the timing of when that's set for.

Is that include or exclude some of the accretion from the transactions? Thanks.

Generally, we're kind of looking at that excluding some of the creation from the transaction for Heritage. But I think the timing, you know, will really kind of pick up probably into the second quarter or so because we still have the borrowing cost on for some portion of this quarter.

So I anticipate hoping to start that increasing up later in the year. Well, we think about it, Matt, as we're starting the year at 337, and we would average, say, 350 or so for the year or so.

despite hoping to start increasing up later in the year? Well, we think about it, Matt, as we're starting the year at 337, and we would average, say, 350 or so for the year. So it can kind of linear.

for average it in for that.

Does that make sense? Yep, that makes sense. Okay, I'll step back in the queue. Thank you. Thanks, Matt.ieu

And thank you.

And one moment for our next question.

And our next question comes from Catherine Miller from KBW. Your line is now open.

Thanks. Good morning. Good morning, Katherine. How are you today?

I'm great, how are you? Doing great, can't complain.

Nice to see the NIM guidance was unchanged, though. That's very different from what we're seeing in other banks, so thank you for that. One other thing I wanted to talk about was just the size of the balance sheet and your growth outlook for the year. I feel like when we were thinking about the first with the BEATS deal and Heritage, we thought that

growth would actually kind of accelerate as we moved into 2023, but you know most are lowering their growth guidance for the year. So how are you thinking about just kind of organic growth?

for y'all this coming year.

You know, in terms of growing the size of the balance sheet, we think it's kind of flattish. That's what we're projecting to try to be conservative, Katherine. But we do think there will be a remix, you know, and we talked about being able to essentially redeploy some of this liquidity we've got coming out of the bond portfolio and that we're going to get out of here to the Southeast. We're going to use that to fund our loan growth as we move forward.

to do that.

Okay, great.

And then back on the securities book, so you will –

You're selling most of Heritage's securities, but in terms of just your core book, do you expect that to also decline throughout the year? As you just mentioned, you're remixing the balance sheet. How much of kind of a decline outside of Heritage would you expect for us to see out of the bond book this year?

So the way the bond book is set up is it it provides us about a quarter, about 250 million or so a year of cash flow out of the portfolio. So it's laddered out so that we get about, you know, a billion bucks or so over the next four years. So that 250 plus prepayment speeds and things will provide significant cash flow out of them.

loan portfolio to be able to fund our five to seven percent loan growth.

we'll fund our five to seven percent loan growth. Great. Okay. That's perfect.

And another one is the expense guide. I know you all are typically very quick in realizing cost savings. Can you just help us think about the timing of the heritage cost savings and maybe how we see much of expense run rates in the next couple quarters?

I think the Heritage cost savings will be, I think we modeled

I think we modeled 50%, 75% for 23. But you know, as Joplin mentioned earlier, we're anticipating that merger, I meant the systems conversion March 31st. So typically that, you know, through that period and then a couple months after.

the staffing, you know, typically that have retention agreements stay on for a couple months post that. So I would be, you know, full quarter, be third quarter as far as for the, you know, salaries and benefits piece of that. But you know, run rate, I'm kind of looking at, I'm still trying to finish up my budget for 23, but I'm thinking that.

Kind of looking at there where they've been in hours, it's probably gonna be 40-ish, 42 or so million a quarter and expenses, that's just kind of a, what I'm looking at right now, but I'm still working through the budget, so, but give or take them.

Give or take a million or so there. Millionaire there. Millionaire there. That sounds good.

But the one Q, would you expect to your point with the conversion in March one Q should be higher than that? Yes Yes, and then we get to that

Go ahead, Kazrin.

I would say you're higher once you but then you get into that maybe 40 to 42 million dollar level as you move through the year. Exactly. Yeah, I was kind of looking at a total, you know, 165 or so somewhere in that range, but yeah, it'll take to the later part of the year to get to that 42 probably.

If you would like to ask a question that is star 11, and one moment for our next question.

And our next question comes from Christopher Marinette from Janie. Your line is now open.

Hey thanks good morning thanks for hosting the call. Just want to go back to the loan to under the positive ratio. I'm happy you mentioned it, but I didn't fully catch it. Would it increase from the positive ratio to the negative ratio?

or not. I understand the point about funding internally with the measures you just said. I think you said do we expect loan deposit ratio to increase?

Correct. Yes, we do. We don't plan on growing the size of the bouncing per se in order to fund the loan growth. So we'd like to add some more leverage and we think that we can, so we ended the quarter at what? About 68 on average. I think we're projecting 72% loan deposit ratio is kind of our visibility.

that all the borrowing is combined. Yeah, no, all the borrowing, those would decline. We hope to, as we've typically done in the past, as the seasonality of those public funds come in, the selling of Heritage's portfolio, we expect them to not be borrowed post the first quarter. And Leonard, Chris Leonard noted in his comments

part of the reduction in the size of their balance sheet was paying off some of the debt that they had as we put the two balance sheets together.

Yep, I caught that. Thank you for that reminder. And I guess just to go back to the deposit data, I know you mentioned in Max's question earlier about just the pricing in September , et cetera. Are betas in general going to have a little bit more lift at the moment, or would they actually sort of trend down? And I guess I'm curious if you think about that?

be the ones who are going to pay this holistically, but also maybe on some of the

perceived sensitive areas like the public funds, would those have any more movement than you have historically seen?

Well, I can't tell you I've ever managed to or we've ever managed to...

some of the scenarios we've had over the last couple of years. I felt somebody the other day, hey this commercial bank is supposed to be boring. We're not so tell about volatility, but in any event.

We just we don't feel the deposit pressure right now that we felt at the end of literally we looked up at the end of September and two hundred million dollars went away like just in a matter of weeks and so that's why we agonized over that decision should we move on a percentage basis.

this large, but I think it was the right decision because it really stymied the runoff. So we continue to see banks out there doing deposit specials that are really high, and our strategy has been we don't feel the pressure to move right now on our transaction rates. And our CD specials we're still keeping below our competitors because

We just don't feel the need to have to get up there and compete at the top end of the market. So having said that, it doesn't feel that way now and it seems like...

The consumer.

When they were first here and how much rates were going up, they're going, well gosh rates are skyrocketing. But now the field is kind of rates are plateauing a bit and I know I've read some other guidance where people were talking about bay is accelerating. I just, I don't, and I could be way off. We just, we don't feel it right now.

We put that CD special in, I can't remember exactly what month that was. We had adjusted that once during the quarter, but that's been, we haven't changed that. And I really don't think, we're just doing these one off matches, we've been doing that basically November , December and continuing a little bit in January .

But I just don't see it moving our deposit costs that much going forward because we're... Chris, the posted rate on our current special is no secret. Our current special is a nine month CD for $305. Right. And are we $170? What's the... $175. $175 for 19 months.

And we've been able to kind of retain it that. So, and again, those are posted, everybody knows they're out there. Again, we're just fighting around the margin. The other thing I would say to you is, what we've talked about not necessarily.

growing about being aggressive and having to pay up to grow the balance sheet. Where we started this, you know, the markets that we added this last year are very different and definitely an inflection point for our company. So the ability to grow non-interest bearing deposits is even greater in Tampa, Savannah, Jacksonville, Atlanta, particularly Atlanta, Jacksonville, Tampa.

where we have a much more C&I or there's much more C&I opportunities and our treasury management services become much more important. So we definitely will grow the balance here or have a strategy to grow non-interest bearing deposits as we get more C&I focused.

Now that's helpful background, thank you both for that. And I guess just my follow-up, Poppy, just more strategically, are you comfortable not doing an acquisition this next 12 months? I mean, you have a lot to do internally and obviously a lot of many great things ahead of you as you discussed. We are. We absolutely are. As you know, we've done a number of acquisitions, and a lot of that has been ordered to drop.

Thank you.

And one moment for our next question.

And we have a follow-up question from Matt Olney from Stevens. Your line is now open. Thanks. Just want to ask about the non-interest income in the fourth quarter a little bit slower. It looks like mortgage drove that. Just any other commentary on the 4Q fees and the Alex from here?

Thank you. You're right Matt. It was all it was basically all mortgage was off more than we really anticipated. That continues to be a little bit flat. As you know, we have a pretty good private banking market share. So we do a lot of wonderful family in that book for the...

for the high net worth individuals. Those pipelines look pretty good, but the basic mortgage pipelines, I think, are still pretty slow.

for the high net worth individuals. Those pipelines look pretty good, but the basic mortgage pipelines, I think, are still pretty slow. Okay.

Those pipelines look pretty good, but the basic mortgage pipelines, I think, are still pretty slow. Okay. And then I think

I think Heritage had a pretty decent fee income platform, so when we kind of layer this together, Dede, what kind of fee range can you give us for the first quarter?

Actually, let me see one second right here, Matt. I think.

I would say maybe in the.

The end.

12, maybe, maybe. I really haven't finished that section kind of going through all that in detail, adding Heritage in. So I really hate to give a number, but I think it definitely may be, you know, 10 or 11 million there. But that's just kind of a guess. I mean, a good guess at the moment.

Okay, maybe we can follow up on that later. Yeah, we can definitely. Matt, you've been around D.D. and her guesses are pretty good though. That's right. Exactly right. Well, I guess just stepping back a little bit, Hoppy, when you announced the heritage deal last year, I think you.

You mentioned the goal of achieving that $4 EPS run rate with the full integration of beach, full integration of heritage. And since we talked about that, I think the deposit market's changed. You mentioned the adjustments you've made on your deposit rates. I'm just trying to appreciate how impactful that change in deposits, the world has been. I think it maybe changed a little bit when we talked about it before, but I think obviously could either Uh, focus or focus the money onural. This isn't me thinking what?

impact that $4 EPS goal or any other puts and takes that are material that we should think about in relation to that $4 EPS goal. Thanks.

I mean, yeah, I think so, Matt. I mean, what we're looking at and going through and working through right now, I still think because of where I think on the asset earnings side, we did pick up as far as besides just looking at the increased costs on the deposit side. I think with the savings and adding heritage, yeah, I still think by the end of the year, we can be doing a lot of work in those markets.

we can shoot for that $4 run rate for next year. We still feel confident in that Matt. One thing we didn't really talk about, but we still are slow. Legacy Bank is slightly asset sensitive at the end of the court, but HSBI really improves our asset sensitivity on the whole. So we still think there's a little, and that's why we're guiding back to sort of the 350 margin, 350, 360.

We did issue $6.9 million in new shares to the Heritage.

HSBI shareholders so when y'all are working on your calculations we all have the same share. If not you'll be getting a follow-up call from DeeDee about making sure your share counts are right. $6,92422, how about that? Yeah, I'll make sure to capture that in the model update.

Thanks, guys. Good deal. Thanks, Matt. And thank you. And I'm showing no further questions. I would now like to turn the call back over to Hoppy Cole for closing remarks.

Well, thanks everyone. Appreciate your attendance today. As you can see, we think we're in really good shape and look forward to 2023. Thanks for joining and we'll be in touch next floor.

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